I subscribe to the view that the transparency at these auctions is fantastic. The last one took about 22 hours; it started at 2 pm on Thursday (May 11) and finished on Friday at 11 am, said Kohli.Kaavya Chandrasekaran | ET Bureau | May 25, 2017, 07:26 IST

Aggressive bidding at the Bhadla Solar Park auctions earlier this month saw solar tariffs touch a record low. But Manoj Kohli, executive chairman of SB Energy, which bagged two projects at the auctions, says they are still viable. SB Energy is a joint venture formed by Japan's SoftBank, Taiwan's Foxconn and Bharti Airtel. The company intends to invest $20 billion in the country's renewable energy sector. Kohli, former CEO of Bharti Airtel, tells Kaavya Chandrasekaran why he is enthusiastic about auctions in India and how SB Energy has been working with the government to improve the quality of power purchase agreements. Edited excerpts:

SB Energy recently won two major projects at the Bhadla Solar Park — 100 MW at Rs 2.63 per unit and 300 MW at Rs 2.45 per unit. This is way lower than the winning tariff at the last auction in Bhadla just a year and half ago, which was Rs 4.34 per unit. How were you able to make such aggressive bids?Since that time there have been a few major changes in the global solar sector. The most important change is that module prices have come down by about 35%. This is a global phenomenon led by China, and has nothing to do with the Indian market specifically. Everyone who is buying from China has benefitted. Clearly, China’s internal solar roll-out plans have slowed down a bit and more of its capacity is being exported. The second factor is that more innovation has happened, automation has happened, module design has improved further. The third is that economies of scale are bringing prices down. Earlier the projects were smaller. The financing cost has come down as well. In India, interest rates have come down. Every bank in the world had a certain quota for energy funding. I’ve met so many bankers and find that the majority of them have moved either 60% of that quota to renewables, or 80%, and some of them even 100%. This means the liquidity of green funding is growing by leaps and bounds. So once the liquidity grows, cost comes down.

Are you saying that your bids are not as aggressive as they appear? Have you assumed tariffs will fall even more before you place your orders?The bids are aggressive but they are viable. Module prices may not fall for some quarters now, because if you see price behaviour in the last five years, it has fallen and stabilised for 6-8 months, and again fallen and stabilised for the next 6-8 months. I think it will stabilise now for some time at least and next year it may go further down.

What is your debt to equity ratio?I don’t want to answer on the specifics (of our projects). Industry debt to equity ratio is 75:25.

The 350-MW Andhra Pradesh project —the first you won in December 2015 —was also at a record low tariff at the time — Rs 4.63 per unit. How has it shaped up?It has been commissioned — 51days before time. This is a first in the history of solar projects of the last 7-8 years in India. Generally, solar plants have been delayed by 3-6 months. We did it because we thought we should start with a good culture. The plant is performing better than the internal targets we had set for it.

So you don’t subscribe to the view that auctions are getting too competitive with tariffs falling to levels that are not viable...I subscribe to the view that the transparency at these auctions is fantastic. The last one took about 22 hours; it started at 2pm on Thursday (May 11) and finished on Friday at 11am. My mother was very upset with me; she asked “Where were you all night?” In this country, transparency is most important. The auction was completely online: no human touch, no scope for manipulation. You get eight minutes. If you play, eight minutes more are given. Then someone else plays, then someone else gets eight minutes…it goes on that way.

Have you disclosed the investment for these projects?No, we have disclosed only the total investment for 20 GW (that we intend to set up). We don’t have to disclose to the government either because ours is not a listed company.

Did you reach the limit of your competitiveness with the tariff going down to Rs 2.45 per unit, or do you think you could have gone still lower?I can’t tell you that. That’s my secret sauce. But I can say with confidence that (the tariffs at) both auctions are viable for us, are within the standards of oftBank, and we will build high quality plants. We have not been bidding for the last one year. The reason is very precise — we were discussing with the government how to enhance the level of the standard PPA (that developers sign). The level of the PPAs has been enhanced now. I understand this will be notified very soon. That was very important for us — if we have to invest so much money in India, the level of the standard PPA has to be at least close to international standards.

What was the problem with the PPAs?Payment guarantee (was an issue). If we put in, let’s say, $500 million, we can’t have a situation where in the first month itself the payment is delayed. Our shareholders and bankers are very clear, there should be no payment default. In Japan, the definition of default is very clear: even one day’s delay in payment is a default. In India, a lot of people talk loosely and say — there’s no default, but there’s a three-month delay (in payment). So there is this gap of understanding. The other problem was off-take guarantee. It has to be there. We are putting in so much money; there has to be some sanctity to the PPAs, which I think the government has understood.

Is the fact that there is no domestic solar manufacturing capacity a concern? Does SB Energy have any plans of investing in manufacturing?Yes, that is a major gap. It is a gap I suffered when I was in telecom as well. There are one billion mobile phones in India; it is the second-largest mobile market in the world, and yet there is no domestic manufacturing of equipment, or manufacturing of devices. Some manufacturing has started in the last year or two but till then (there was nothing). Even now, components mostly come from China and are assembled here. (With solar), the scale is not there for manufacturing. India should get both technology and scale. We believe two equipments of high value should be made in India: one is solar modules — which are 60% of the solar project cost — and second are storage batteries. We have given our feedback to the government.

SoftBank had incurred losses of $1.4 billion on its marquee Indian investments, Snapdeal and Ola. Housing.com, which again SoftBank backed, also had its share of problems. Is this likely to affect SoftBank’s attitude to investment in India in any way, especially investment in renewable energy?Whatever we do, we have very clear return expectations. We will not do any project which doesn’t meet those expectations. After Fukushima (the nuclear disaster of 2011), Masa (Masayoshi Som, CEO of SoftBank) became very passionate about renewable energy. We are No.1in Japan in solar because he really wants to do it.

You have also been a strong advocate of clean energy. What measures did you take to move towards clean energy during your time at Airtel?Bharti Airtel has been at the forefront in push towards clean energy technology among telecom providers in India. Airtel was among the first to power telecom towers with solar power. Airtel has an installed capacity of 1MW rooftop solar for MSC (mobile switching centre) sites and 17.4 MW solar for BTS (base transceiver station) sites.